FREEDOM OF INTERSTATE TRADE
Introduction
The justification for yet another article1 on section 92 of the
Constitution is that students, and possibly others, may find useful a
straightforward account of the main line of development in its interpretation. The aim of this article is to give such an account, free from
the mass of detail and case-law which attends the application to
particular areas of legislation of the general principles which have
been established.
The whole text of the section is as follows.
On the imposition of uniform duties of customs, trade, commerce, and
intercourse among the States, whether by means of internal carriage or
ocean navigation, shall be absolutely free.
But notwithstanding anything in this Constitution, goods imported
before the imposition of uniform duties of customs into any State, or
into any Colony which, whilst the goods remain therein, becomes a
State, shall, on thence passing into another State within two years
after the imposition of such duties, be liable to any duty chargeable an
the importation of such goods into the Commonwealth, less any duty
paid in respect of the goods on their importation.
Nowadays the only material words are trade, cmmerce, and intercourse m o n g the States . . . shall be ccbsolutely free. Their importance
is that they act as a restriction upon the powers of both the Commonwealth and the States to legislate with respect to trade and commerce.
It has been observed2 that two distinct questions are inherent in
every section 92 case. The first is whether the particular activity under
consideration is properly characterized as interstate trade, commerce
* Ph.D. (Adel.); LL.M. (Lond. & Adel.), LL.M.; Barrister and Solicitor; Hearn
Professor o$ Law in the University of Melbourne. This paper is drawn from a
chapter in a forthcoming book on Australian federal constitutional law.
1 The more recent literature includes 'The Commerce Power under the Australian Constitution', (1942) 42 Columbia Law Review 660; Beasley, 'The Commonwealth Constitution: section 92 - Its History in the Federal Conventions', (1948)
1 University of Western Australia Annual Law Review 97,273,433; Wright, 'Section
92 - A Problem Piece', (1954) 1 Sydney Law Review 145; Hart, 'Some Aspects of
Section 92 of the Constitution', (1957) 30 Australian Law Journal 551; Lane, 'The
Present Test for Invalidity under Section 92 of the Constitution', (1958) 31 Australian Law Journal 715; Lane, Approaches to and Principles of +tion
92 of the
Constitution', (1959) 32 Australian Law Journal 335; Anderson, Freedom of Interstate Trade: Essence, Incidence and Device u n d y Section 92 of the Constitution',
(1959) 33 Australian Law Journal 276; Lane, Section 92: Inconsistency, Shibboleths and Uncertainty', (1960) 33 Australian Law Journal 399; Singh, ' "Circuitous
Means" or "Concealed Design" and Section 9F of the Australian Constitution',
(1962) 36 Australian Law Journal 95; Morris, Section 92 of the Commonwealth
Constitution', (1963) 4 University o f Queensland Law Journal 369; Wynes,
Legislative, Executive and Judicial Powers i n A~stralia(3rd ed.) 317-388.
2Hughes and Vale Pty Ltd v . N . S . W . ( N o I ) (1953) 87 C.L.R. 49, 97-8, per
Fullagar J. Repeated in Grannall v . Marrickville Margarine Pty Ltd (1955) 93
C.L.R. 55, 80.
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or intercourse. The second is whether its freedom has been impaired.
Logically the first is anterior to the second, for if the answer to the
first is no, the second does not arise; but it is easier to understand
the law the other way about. This is because the effect of the section
depends far more on the meaning given to the vague words 'absolutely
free' than on the reasonably precise words 'trade, commerce, and
intercourse among the States'. This emphasis is reflected in the cases.
The main preoccupations of the High Court in the interpretation of
section 92 have been the definition of an appropriate concept of impairment of freedom and the invention of a criterion for its application.
It is with the course of these preoccupations that this article is
concerned.
Analysis of the Problenz; Present Law
The difficulty with the expression 'absolutely free' is that it is
logically incomplete. The concept of freedom implies and acquires
meaning from the correlative concept of restraint. If something is said
to be free, no significant meaning is conveyed unless it is made clear
either by express statement or by the context what the freedom is from.
The nearest section 92 comes to an express statement of what it is that
interstate trade is to be free from is the word 'absolutely'. As a matter
of grammar it might be argued that 'absolutely free' means free from
any restraint at all. Since section 92 is a law, this becomes the argument that 'absolutely free' means free from any legal restraint. Section
92 is not, however, merely a law subject to grammatical analysis. It
is also an instrument of government. T o read it as saying that interstate trade can be made subject to no legal restraint at all is to convert
it into an instrument of chaos. For this reason it has as a practical
matter never been open to the High Court to read section 92 in the
only sense in which it can be regarded as making an express statement
about freedom.
There are three other possibilities: to gather the meaning of freedom
from the context; to treat the section, apart from the transitional provisions, as expressing no credible proposition and being therefore
meaningless and without effect; or to imply the restraints from which
interstate trade is to be free by reference to some other principle of
construction .3
The first possibility, gathering the meaning of freedom from the
3 1 am indebted to a student's answer to an examination problem in 1967 for
the following additional suggestion, which I believe to have the merit of being
priginal but the defect of being untenable. It rests on the presence in the passage
trade, commerce, and intercourse among the States' of commas after the words
'trade' and 'commerce'. The suggestion is that these two words are not to be read
as linked with 'among the States' but in isolation. Only the word 'intercourse' is
to be read as qualified by 'among the States'. The effect is to render free not only
iiltercourse among the States but also all trade and all commerce, whether interstate
or not.
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Freedom of Interstate Trade
239
context, would have led the courts to an understanding of section 92
very similar to what was originally intended. The theme of the context
is customs duties. Sections 86, 88-90 and 92-95 all refer to customs and
several of them to events to occur upon the imposition of uniform
duties of customs by the Commonwealth. They all appear in the
chapter of the Constitution headed Finance and Trade. Section 92
itself starts with one of the references to the imposition of uniform
duties and continues in its second paragraph with a transitional measure also concerned with customs. In such a surrounding it hardly
requires an effort of the imagination to conclude that what was intended was freedom from duties or other taxes levied on goods by
reason of their being sent interstate in the course of trade or commerce.
This interpretation of section 92 is consistent with the transfer to the
Commonwealth by section 90 of exclusive power to legislate with respect to customs, excise and bounties; for, together with the prohibition
in section 99 on granting preferences in matters of trade, commerce or
revenue to one part of the country over another, it prevents the Commonwealth from using its exclusive legislative power to reimpose the
very barder taxes which it was a main object of federation to abolish.
Legislation by the States which erected trade barriers by means other
than taxation, as for example by simple prohibition, could have been
displaced by Commonwealth legislation under the trade and commerce
power in conjunction with section 109.3aIt is true that by the time
section 92 came under scrutiny the High Court had committed itself
to a mode of interpretation of the Constitution which excluded reference to the convention debates; so that history could not be called
in aid. But history hardly needed to be called in aid: an impartial
examination of section 92 in context should have led to the same
result. This was not done.
Neither was the second approach adopted. This requires the court
to dismiss section 92, apart from the transitional provisions, as having
no operative effect on the ground that freedom from legal restraint
which is absolute is not a possible meaning and no other meaning is
indicated. Although at first sight this solution seems cavalier, it leads
in practice to much the same result as reading section 92 as referring
only to border taxes. Its main apparent defect is that the States remain
free to impose taxes, other than customs or excise duties, which operate
in restrain of interstate trade, but this possibility has little substance.
In the first place it requires constant ingenuity by the States to avoid
trespassing on the exclusive power of the Commonwealth to legislate
with respect to customs and excise. Secondly, the powers of the Com3. 'When a law of a State is inconsistent with a law of the Commonwealth, the
latter shall prevail, and the former shall, to the extent of the inconsistency, be
invalid.'
4 Municipal Council of Sydney v. Commonwealth (1904) 1 C.L.R. 208, 213-4;
Tasmania v. Commonwealth (1904) 1 C.L.R. 329, 333.
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monwealth not only to enact legislation displacing obnoxious State
legislation, but also to bring financial pressure to bear, both under the
Constitution and politically, are more than adequate to protect interstate trade from any interference inconsistent with Commonwealth I
policy. As to the Commonwealth itself, not only does it remain subject I
to the prohibition on preference in section 99 and the prohibition on
discriminatory taxes in section 51(2), but also is hardly likely to find
a use for border taxes which, however advantageous to any one State,
almost by definition are neither politically nor economically advantageous to the country as a whole.
In the event the High Court, assisted at several critical stages by the
authority of the Privy Council, has taken the third course and developed a theory of section 92 which neither treats it as a meaningless proposition nor restricts its effect by reference to the surrounding context.
Interstate trade and commerce is free from all restriction, whether
legislative or executive in character, except to the extent that reasonable regulation of any activity, interstate trade and commerce as much
as any other, is necessary to the continued existence of an ordered
society. This result is arrived at by construing the section as far as
possible by inference from its exact terms. Reasonable regulation is
consistent with section 92 because freedom to trade presupposes a
society ordered by law. Without such a society there can be no trade.
'The reason for regulation is therefore that without it there can be no
freedom. Ordered regulation of interstate trade, far from conflicting
with the freedom guaranteed by section 92, is necessarily implied by
it. Similarly it does not follow that because a legislative or executive
act has restrictive effects on interstate trade it impairs the freedom of
interstate trade. It depends whether the criterion upon which it operates is an act of interstate trade.
A simple instance is the arrest for drunken driving of a man carrying goods in the course of his interstate road transport business. H e
is effectively prevented from continuing in interstate trade, for the
time being anyway, but the arrest does not contravene section 92.
The reason is that the law justifying the arrest does not operate by
reference to any act of interstate trade, commerce or intercourse. T h e
driver is not arrested because he is travelling interstate but because he
is driving whilst drunk. With this may be compared a law forbidding
the carriage of goods by road for reward except under licence and
leaving to an executive authority discretion whether to issue licences
and on what terms. Such a law operates by reference to an act of
trade or commerce, the carriage of goods for reward. Since it totally
prohibits that activity, subject only to an unfettered executive discretion, it authorizes interference going far beyond reasonable regulation in the interests of a general freedom. Therefore it cannot apply
to anyone carrying goods for reward interstate.
1
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This approach to the problem of defining freedom under section 92
.~
originated in dissenting judgments by Dixon J. in the 1 9 3 0 ~ The
very fact that he was in dissent at the time indicates that it has not
always been the guiding principle. Some acquaintance with anterior
and parallel developments is still necessary for a proper understanding
of its significance and meaning.
Early Developments; W . G A. McArthur Lta? v . Queensland
(McArthur's Case)
The first attempt to state a coherent theory of section 92 was made
in McArthur's Case6 in 1920. Before that there had been only five
reported decisions.' Little of enduring value emerged from them, but
two points were settled. One was that section 92 is not complied with
merely because goods have been allowed literally to enter a State
freely.8 A burden imposed after entry by reference to the interstate
origin of goods is as much an interference with freedom as a restriction imposed at the border itself. This was decided in the first case
on section 92, Fox v. Robbinsg in 1909. Under Western Australian
legislation wine could be sold only under licence. Licences were
obtainable on payment of a fee. Fees for licences to sell wine produced
from fruit grown elsewhere were twenty-five times dearer than fees
for licences to sell wine produced from fruit grown in Western Australia.1° They were also subject to more onerous conditions. Not
surprisingly it was held that the differential against interstate wine
was invalid. It was immaterial that the tax burden was imposed by
reference to the sale of the wine rather than its entry. It was imposed
because it had been brought from another State. Secondly, in Duncan
v . Queens2and1l in 1916 the opinion was expressed by all the judges
that section 92 was not limited to the ~rohibitionof simple fiscal
5 Particularly 0. Gilpin Ltd v. Commissioner for Road Transport (1935) 52
C.L.R. 189, 202, infra n. 24. Also Willard v. Rawson (1933) 48 C.L.R. 316, 329;
T h e Kine Q . Vizzard. ex v. Hill (1933) 50 C.L.R. 30. 56. After adhering to his
view in Bessell v. ~a&man-(1935\52 C.L.R. 215. 220. decided on the same dav as
but after Gilp-in's case (ibovej, -his Honour accep;ed the contrary opinion in
Duncan and Green Star Trading Co. Pty Ltd v. Vizzard (1935) 53 C.L.R. 493,
504, and Riverina Transport Pty Ltd v. Victoria (1937) 57 C.L.R. 327, 362-3, for
the Dumoses of transuort legislation. on the basis of authoritv alone.
6 ~6 A.
: ~ c ~ r t b Ltduv.
u r ~ u e e n s l a n d(1920) 28 C.L.R..530.
7 Fox Q . Robbins (1909) 8 C.L.R. 115; T h e King v. Smithers, ex p. Benson
(1915) 16 C.L.R. 99; N . S . W . Q . Commonwealth (The Wheat Case) (1915) 20
C.L.R. 54; Foggitt, Jones 6 Co. Ltd Q . N . S . W . (1916) 21 C.L.R. 357; Duncan v.
Queensland (1916) 22 C.L.R. 556.
8 C f . Quick and Garran, Annotated Constitution of the Australian Commonwealth, 845: 'the right of introduction without the right of disposition would reduce
freedom of trade to an empty name'.
9 (1909) 8 C.L.R. 115 (Griffith C.J., Barton, O'Connor, Isaacs and Higgins JJ.)
10 £50 as against £2 ($100 as against $4).
11 (1916) 22 C.L.R. 556, 571, 573, 587-9, 618-9, 636, 639, 644 (Griffith C.J.,
Barton, Isaacs, Higgins, Gavan Duffy, Powers and Rich JJ.).
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burdens such as border tariffs. This view has been adhered to ever
since.12
McArthur's Case13 arose under Queensland price-fixing legislation.
The Profiteering Prevention Act 1920 (Qld) authorized the setting
of maximum prices at which goods could be sold in Queensland.
McArthur was a company registered in New South Wales. It was not
registered in Queensland and had no premises there. It dealt in textiles
and operated by sending out travelling salesmen from Sydney. Sales
made in Queensland were met by sending consignments from New
South Wales. These sales were at prices above the Queensland maximum. Relying on section 92, McArthur sued for declarations and
injunctions to prevent the enforcement of the Act against itself. It
was held14 that the Act could not apply to interstate sales, but to say
as much gives no idea of the true significance of the case. The following components of the reasoning gave it an importance which in some
respects continues at the present day.
First, what was meant by an interstate sale, as distinguished from
an interstate movement of goods, was explained with precision. On the
facts only a small part of McArthur's trade consisted of interstate
sales although all of it, in relation to Queensland, led to the interstate
movement of textiles. Secondly, the concepts of trade and commerce
in general and interstate trade and commerce in particular were given
a wide meaning, extending far beyond the mere act of transportation
across a State border. Neither of these aspects of the case is relevant
to this article. Thirdly, it was held15 immaterial that the price restrictions did not on their face discriminate against interstate trade but
applied equally to both interstate and intrastate trade. It was equally
immaterial that since they would be set to suit internal conditions
they might well in effect discriminate against interstate trade. If a
burden was imposed on interstate trade it became no less a burden
by applying to intrastate trade also. Fourthly, it was held16 that section
92 did not bind the Commonwealth, but only the States. This remained the law until 1936, when it was overruled by the Privy Council
in lames v. Commonwealth.l7
On its face the Constitution appears to give no warrant for this last
decision. Section 92 itself is general in its terms and says nothing about
applying only to the States. Moreover it operates primarily as a restriction on the trade and commerce power. So far as the Commonwealth
is concerned this power derives in the first instance from section 5 1(I),
which is expressly 'subject to this Constitution', and the remainder of
the Constitution includes section 92. The reasons advanced in face of
12 Commonwealth v . Bank of N.S.W. (1949) 79 C.L.R.
14 Gavan
13 (1920) 28 C.L.R. 530.
16 Gavan
15 Gavan Duffy J. dissenting.
17 (1936) 55 C.L.R. 1, infra n. 58.
497, 629 (P.C.)
Duffy J. dissenting.
Duffy J. dissenting.
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Freedom of Interstate Trade
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these obstacles to support the conclusion that nevertheless the Commonwealth could impair the freedom of interstate trade retain interest
because they turn on the relationship between section 92 and section
51(1).
The premiss was that if the Constitution were read literally, section
92 virtually cancelled out section 51(1).18 This could hardly have
been intended. Moreover there were a number of express restrictions
on Commonwealth legislative power in the Constitution, such as the
requirement that duties be uniform and the prohibition on preferences,
which effectively prevented the Commonwealth from interfering with
interstate trade by the imposition of border tariffs or their equivalent.
These restrictions rendered section 92 superfluous in its application
to the Commonwealth but they did not apply to the States. It followed
that section 92 was directed at the States.
This holding was distinguished above from the giving of a wide
meaning to the concept of interstate trade, but the two were in fact
interdependent McArthur's Case19 was decided in the same year and
by the same court as the case of the Amalgamated Society of
Engineers v. Adelaide Steamship Co. Ltd (Engineer's Case),20
which marked a new point of departure in the interpretation
of the Constitution. It was established in the Engineer's Casez1
that powers expressly conferred on the Commonwealth were to
be given their widest, as opposed to their narrowest, reasonable
interpretation. A wide definition of interstate trade was consistent
with this approach because its effect was to give a wide scope to
the trade and commerce power of section 5 l(1). Such a definition
had correlative effects on State power. T h e wider the definition
of interstate trade and commerce, the narrower the scope of
the residual trade and commerce power left with the States. This
happened by reason not only of section 92 but also of section 109.22It
happened under section 92 because the greater the number of trading
and commercial activities which had to be left free, the fewer became
the number of such activities in respect of which the States could legislate. It happened under section 109 because the greater the number of
activities falling within the meaning of interstate trade and commerce
for the purposes of section 51(1), the greater the area in which Commonwealth laws enacted pursuant to section 5 l(1) would displace
inconsistent State laws. The result of simultaneously freeing the Commonwealth from the restriction of section 92 and giving a wide content
to interstate trade and commerce was to leave the Commonwealth the
almost unhindered control of national trade and commerce.
18 (1920) 28
20 (1920) 28
22
C.L.R. 530, 558.
C.L.R. 129.
Supra, n. 3a.
19 (1920) 28
21 Ibid.
C.L.R. 530.
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Evczluation of McArthur's Case
is no longer good law in respect of the
Although McArthur's
limitation of section 92 to the States, it is to be observed that the solution is offered to the problem of the section made good economic and
governmental sense. It was inevitable that with the passing of time
more and more trade and commerce would come to have a national
rather than an intrastate character. Moreover the State boundaries,
however explicable historically, by no means correspond to natural
economic divisions. It would have been and still would be a distinct
national advantage for the central government to have unhampered
control over the economic regulation of the country as a whole. It
may well be that the pressure of events is arriving at the same result,
but it can hardly be doubted that the development of coordinated
national control of the economy has been and continues to be hindered
by the restrictions imposed on the Commonwealth by section 92.
From this point of view it was unfortunate that the arguments
advanced in McArthur's Case24 to justify the conclusion that section
92 applied only to the States entailed several mistakes in constitutional
interpretation. It is not the case that if it binds the Commonwealth
it becomes a 'simple negation'25 of section 51 (1) or will 'practically
nullify'26 that section. The reason is that although the words 'trade'
and 'commerce' have the same meaning in both section 51(1) and
section 92, the context gives them a different significance in the two
places. In section 5 l(1) they occur in the context of a grant of power
to legislate with respect not only to the subject matter of interstate
trade and commerce precisely defined, but also, by reason of section
5 1(39), to matters incidental to the execution of that legislative power:
with respect, in other words, to matters incidental to interstate trade
and commerce as well as to interstate trade and commerce itself. In
section 92 the context is a simple prohibition of infringement of the
freedom of interstate trade and commerce itself, with no reference to
matters incidental thereto. The legislative power of section 5 l(1) has
therefore on the face of the Constitution a potential area of operation
wider than that of section 92.
Secondly, and equally important, it is also not the case that a law
with respect to interstate trade and commerce necessarily is a law
restricting the freedom of interstate trade. It was well recognized by
1920, and continued to be recognized in McArthur's Case2' itself, that
section 92 presupposed a society ordered by law.28 It followed that
legislation could be enacted under section 51(1) for the purpose of
ordering or regulating interstate trade which did not conflict with
24 Ibid.
(1920) 28 C.L.R. 530.
26 Ibid.
(1920) 28 C.L.R. 530, 558.
27 (1920) 28 C.L.R. 530.
28 Duncan v. Queensland (1916) 22 C.L.R. 556, 573, 592, 597, 620-1, 640, 650;
McArthur's Case (1920) 28 C.L.R. 530, 550-1.
23
25
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section 92. Also it has since become clear29that section 5 l(1) extends
to empowering the Commonwealth to enter into trading and commercial activities on its own account, which again does not conflict
with section 92. Once it is conceded that section 51(1) has a significant content even if section 92 does bind the Commonwealth, there
remains no warrant for ignoring the implications of the words 'subject
to this Constitution' with which it begins.
Practical Problems ArisingNotwithstanding these formidable objections to the view that section
92 did not bind the Commonwealth, it remained the law until overruled by the Privy Council in James v. C o m m o n ~ e a l t hin~ ~1936. In
itself it did not cause difficulty. The problems it posed in practice
arose from the corollary that what was interstate trade, and therefore
what was an interference with interstate trade, should be given a wide
interpretation.
The conflict which emerged between 1920 and 1936 was in effect
between McArthur's Case31 and an earlier decision, the N.S.W. V.
Commonwealth (Wheat Case).32 In the W h e a t Case33 in 1915
the question was whether in the interests of facilitating control
of the food supply during wartime the government of New
South Wales could compulsorily acquire all wheat in the State,
regardless of whether it was already the subject of interstate
sale. It was held that there was no conflict with section 92 because
the Act operated upon ownership and not upon trade. Whoever was
the owner of the wheat for the time being remained free to trade with
it. This decision implied a narrow view of the content of interstate
trade; or, to put the same point differently, a narrow view of what
amounted to an interference with interstate trade. In the interests of
government regulation of the economy, section 92 was restricted in
scope.
The doctrine of McArthur's Case34 fundamentally conflicted with
this approach, for it depended on giving section 92 a wide scope where
it applied. This conflict was not foreseeable because it is clear from
dicta in the cases preceding McArthur's Case35that the Court assumed
earlier that section 92 did bind the C o r n m o n ~ e a l t h If
.~~
this assumption is made it follows that to give section 92 a wide interpretation is a
serious restriction of
power to regulate the economy. In
29 A.N.A. v.
30 (1936) 55
31 (1920) 28
Commonwealth (1945) 71 C.L.R. 29.
C.L.R. 1.
C.L.R. 530.
32 N.S.W. v. Commonwealth (1915) 20 C.L.R. 54 (Griffith C.J., Barton, Isaacs,
Gavan Duffy, Powers and Rich JJ.).
33 Ibid.
34 (1920) 28 C.L.R. 530.
35 Ibid.
3,6 N.S.W. v. Commonwealth (1915) 20 C.L.R. 54, 66, 79, 95, 100, 105; Duncan
v. Queensland (1916) 22 C.L.R. 556, 572-3, 593-4, 620, 639.
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the Wheat
itself this consideration may have been given too I
much play, but in principle it is correct. Since the Wheat Case,38 far
from being overruled, was in effect approved in McArthur's Case,39 '
the seeds of confusion were
Between 1920 and 1936 opinion in the High Court moved against I
restricting the trade and commerce powers of the States to the extent I
implied by McArthur's Case.41This movement of opinion necessarily
relied to some extent on the continuing authority of the Wheat
T h e author of the doctrine in McArthur's Case,43Isaacs J., attempted I
to combat it by arguing that the true basis of the Wheat
was
that the legislation there in question was valid because it did not
discriminate against interstate trade as
This was scarcely convincing because it had little or no support in the judgments in the
Wheat Case.46 The result was that while one part of the doctrine in
McArthur's Case,47 that which said that section 92 did not bind the
Commonwealth, was consistently adhered to, its corollary, that as
against the States the section should be given wide operation, was
steadily undermined. This in turn removed much of the rationale of
the main rule and prepared the ground for its removal.
It was during this period also that the third aspect of McArthur's
Case?* the discrimination question, became important. Although it
is now the law that section 92 is not limited in its operation to the
protection of interstate trade against adverse discrimination, it has been
argued49 that section 92 was originally intended to do no more than
protect interstate trade from discriminatory treatment based on its
interstate character. For a long time there was support in the cases for
this interpretation in the form that a law did not infringe the section
if it applied impartially to both intrastate and interstate trade.50. The
modem rule is the same as the one laid down in McArthur's Case,51that
a law which burdens interstate trade does not escape the operation of
section 92 merely because it imposes the same burden on intrastate
trade.52
38 Ibid.
C.L.R. 54.
(1920) 28 C.L.R. 530, 555.
40 C f . the observatiolr of Higgins J. in Roughley v. N.S.W. (1928) 42 C.L.R.
162, 201, that he did not know when taking part in the decision in McArthur that
Duncan v. Queensland (1916) 22 C.L.R. 556 was going to be overruled. He discovered this only when the judgments were published.
41 Particularly Roughley v. N.S.W. (1928) 42 C.L.R. 162.
42(1915) 20 C.L.R. 54.
43 (1920) 28 C.L.R. 530.
44 (1915) 20 C.L.R. 54.
45 James v. South Australia (1927) 40 C.L.R. 1, 34. Cf. the observation of Starke
J. in James v . Cowan (1930) 43 C.L.R. 386, 392.
46 (1915) 20 C.L.R. 54.
47 (1920) 28 C.L.R. 530.
37 (1915) 20
39
48 Ihid.
49 ~ & r , Australian Constitutional Cases, (3rd ed.), 274.
50 Particularly in the Transport Cases, infra n. 78.
5 1 (1920) 28 C.L.R. 530.
52 Commonwealth v . Bank of N.S.W. (1949) 79 C.L.R.
497, infra n. 95.
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The survival of this rule notwithstanding the ultimate overruling of
McArthur's Casej3 owes much to the efforts of the South Australian
government to compel a dried fruits merchant called James to comply
with its policy on the marketing of dried fruits. T h e details of the
prolonged litigation54 to which these efforts gave rise may be passed
over. Its relevance here is by way of background to James v. Commonin which James achieved his greatest triumph, and secured
for himself a permanent place in the legal history of Australia, by
successfully invoking section 92 against the Commonwealth and
thereby overturning McArthz.wls Case.56
The James Litigatiow; McArthur's Cme Overruled
The significance of the James litigation was that on the facts discrimination against interstate trade in general became confused with
interference with the interstate trade of a particular individual. The
dried fruits marketing legislation in question, which imposed a quota
system, was ultimately held invalid in its application to interstate
trade by reason of section 92. This result could have been arrived at
in either of two ways. One way would have been to hold that the
legislation was invalid because it discriminated adversely against
interstate trade in general, as contrasted with intrastate trade. The
other would have been to hold it invalid because, regardless of comparisons with intrastate trade, it prevented any individual who wished
to sell his dried fruits interstate from doing so if the quantity involved
exceeded the quota set.
The matter came before the Privy Council twice, in J a w s v.
C w a n 5 ' in 1932 and in l a w s v. Cornmonz~ealth~~
in 1936. In both
cases their Lordships decided the issue favourably to James but in
neither did they indicate clearly upon which ground they were proceeding. By the time James v. C o m m ~ n w e a l t hwas
~ ~ decided there
were already conflicting precedents in the High Court, both views of
section 92 having received support.60 The opportunity was thereby
presented for one or the other interpretation to be put on a secure
foundation. It was not taken. Their Lordships seem to have seen their
main task as being the overruling of McArthur's Case.61 This being
decided upon, they preferred to rationalize and approve as much of the
53 (1920) 28 C.L.R. 530.
54 James v. South Australia
(1927) 40 C.L.R. 1; James v. Commonwealth (1928)
41 C.L.R. 442; James v. Cowan; in re Botten (1929) 42 C.L.R. 305; James v.
Cowan (1930) 43 C.L.R. 386 (H.C.), (1932) 47 C.L.R. 386 (P.C.); James v. Commonwealth (1935) 52 C.L.R. 570 (H.C.), (1936) 55 C.L.R. 1 (P.C.); James v.
Commonwealth (1939) 62 C.L.R. 339.
56 (1920) 28 C.L.R. 530.
55 (1936) 55 C.L.R. 1.
58 (1936) 55 C.L.R. 1.
57 (1932) 47 C.L.R. 386.
5 9 Ibid.
60 T h e Peanut Board Case (1933) 48 C.L.R. 266 proceeded o n a n individual
freedom basis, the Transport Cases o n a non-discrimination basis. For the Transport
Cases see infra n. 78.
61 (1920) 28 C.L.R. 530.
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Melbourne University Law Review
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6
existing law on section 92 as possible rather than undertake more overruling as a prelude to a new start. The result was that for practical I
purposes the law was left very much as it had been before. The
decision that section 92 bound the Commonwealth in no way diminished the difficulty of applying the section to particular legislation.
All it did was extend those difficulties to Commonwealth as well as I
State legislation.
The actual question before the Board was whether a Commonwealth Act which in effect imposed quotas on interstate trade in dried I
fruits was valid. It was held that it was not. No-one seems to have
doubted that this result followed if the Commonwealth was subject I
to section 92, for 'the contrary was but faintly contended'?' The
greater part of the judgment is devoted to suggesting the true criterion I
for the operation of section 92 and demonstrating that nearly all the
decided cases up to that time illustrated it. Several formulations of I
the criterion their Lordships had in mind were offered. The fundamental rule was that whether in any given case there was an inter~ this ,
ference with freedom must always be a question of f a ~ t . 6On
basis it was said that section 92 required 'freedom as at the frontier'.64
Alternatively, quoting from section 112 of the Constitution, freedom I
in respect of 'goods passing into or out of the State'.65 Or again, that I
'the people of Australia were to be free to trade with each other and to I
pass to and fro' among the States without any burden, hindrance or I
restriction based merely on the fact that they were not members of
the same State'.66 This last formulation came the closest to precision I
and appeared to adopt the view that all that section 92 prevents is
discrimination against interstate trade based on its being interstate.
That this was not intended is made clear in two ways. The first is that
earlier in the judgment the discrimination test was expressly reje~ted.6~
The second lies in their Lordships' handling of previous
authority.
Two cases are particularly relevant, the earlier Privy Council decision in James v. C o w ~ nand
~ ~a High Court decision, the
Peanut Board v. Rmkhmnpton Harbour Bomd (Peanut Case),69
in which both Jarnes v . Cowan70 and McArthur7' were followed.
Each of them was on compulsory acquisition powers. Their
relevance here is that in each of them the compulsory acquisition
power was held inapplicable to interstate trade on the ground that its
effect in the context was to prevent traders from selling their goods
interstate if they wished to do so. Neither case was decided on the
'
62 (1936)
64 (1936)
66 Ibid.
68 (1932)
70 (1932)
55 C.L.R. 1, 61.
55 C.L.R. 1, 58.
47 C.L.R. 386.
47 C.L.R. 386.
63 (1936)
65 Ibid.
67 (1936)
69 (1933)
71 (1920)
55 C.L.R. 1, 59.
55 C.L.R. 1, 56.
48 C.L.R. 266.
28 C.L.R. 530.
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Freedom of Interstate Trade
249
ground that the powers were invalid because they discriminated against
interstate trade by contrast with intrastate trade.72 This reasoning was
a direct application of McArthur's Case.73 If in James v. C m m m wealth74 the discrimination test was going to be approved it would
have been necessary to overrule McArthurls Case75 on this point as
well as the main doctrine, to explain James v. C a w ~ on
n ~a discrimi~
nation ground and to overrule the Peanut Case.77 Instead both the
more recent decisions were approved and this part of the doctrine in
McArthur's Case was left untouched.
The extent of the inconsistency in the law thereby perpetuated by
the Privy Council is shown by their Lordships' simultaneous approval
of what are known collectively as the Transport case^.'^ In these cases
State motor transport legislation was in question. By its terms the
carriage of goods for reward or by way of trade was prohibited except
under licence. The economic object was to protect the State railways
from undue competition. Licences were issued at administrative discretion subject to conditions and to the payment of fees. This legislation had been repeatedly upheld on the ground that neither in
object nor in effect did it discriminate against interstate transportation
as such. In approving these cases in James v. C o m r n o n w e c ~ l t hthe
~~
Privy Council made it clear that they accepted from them the view
that individual traders did not by reason of section 92 have the 'right
to ignore State transport or marketing regulations, and to choose how,
when and where each of them will transport and market the comrnoditie~'.~~
This passage taken in isolation is unexceptionable. Section
92 has nothing to say as to many regulations, particularly those relating
to health and safety. It is nevertheless misleading because it confuses
that proposition with the quite different one, the one in fact being
advanced in the judgment from which the quotation was taken, that
interstate traders cannot escape being regulated in the same way as
anyone else by virtue of the interstate character of their trade. This
second proposition is the discrimination test in different words. By
their approval of the Transport Casess1 their Lordships were uphold7 2 This may not have been wholly clear in James v. Cowan but it was certainly
true of the Peanut Case.
74(1936) 55 C.L.R. 1.
(1920) 28 C.L.R. 530.
(1920) 28 C.L.R. 530.
76 (1932) 47 C.L.R. 386.
(1933) 48 C.L.R. 266.
Wilkzrd v . Rawson (1933) 48 C.L.R. 316; T h e King v . Vizzard, ex p. Hill
(1933) 50 C.L.R. 30; 0. Gilpin Ltd v . Commissioner for Road Transport (1935)
52 C.L.R. 189; Bessell v . Dayman (1935) 52 C.L.R. 215; Duncan v . Vizzard (1935)
53 C.L.R. 493, decided before James v . Commonwealth. After that case there were
Riverina Trunspo~-tPty Ltd v. Victoria (1937 57 C.L.R. 327; McCarter v. Brodie
(1950) 80 C.L.R. 432; and Hughes and V a e Pty Ltd v . N.S.W. ( N o 1 ) (1953)
87 C.L.R. 49 (reversed on appeal to P.C. (1954) 93 C.L.R. 1).
7 9 (1936) 55 C.L.R. 1.
so(1936) 55 C.L.R. 1, 51, quoting from Evatt J. in Vizzard's Case (1933) 50
C.L.R. 30. 94.
73
75
77
78
1
250
Melbourne University Law Review
[VOLUME
6
ing this view of section 92 at the same time as they were rejecting I
it elsewhere.
Individual Right Theory Established; The Monopoly Cases
The result of this confusion of thought in James v. Commonwealtha2 was an increasing degree of inconsistency in the decisions ,
of the High Court. The two main areas of litigation continued to be
marketing control and transportation. Inconsistency showed itself at I
two levels. Within the area of marketing control there were conflicts 1
between particular cases.83 In due course they were resolved by the
final rejection of the discrimination test. But this step only revealed I
with greater clarity the more fundamental inconsistency between the
rule thus established and the Transport Cases.84 This conflict in turn I
was ultimately resolved by the overruling of the Traxsport Cases.85
The final rejection of the discrimination test in favour of what is
sometimes called the individual right theorya6 of section 92, was the
result of the monopoly cases: Australian N a t i m l Airways Pty Ltd v.
Commonwealth (Airlines
in 1946 and Commonwealth v.
Bank of N.S.W. ( B m k Nationu1izatio.n CasejS8 in 1949.In the Airlines Caseg9the Commonwealth attempted to do two things: to set u p
a government airline to undertake interstate air transportation and to
give this airline a monopoly. It was held that the legislation was valid
in respect of the first of these aims but invalid in respect of the second.
The first turned on the scope of the trade and commerce power of
section 51(1). The attempt to set up a monopoly failed because it
contravened section 92.
The Australian National Airlines Act 1945 (Cth) set up the Australian National Airlines Commission with power to establish, maintain and operate interstateg0commercial airline services. The monopoly
provisions were in Part 4 of the Act which consisted of Sections 46-49.
The Commission was obliged in the same way as anyone else to obtain
a licence if it wanted to run an air service, but by section 46 anyone
else's licence to provide a service over any particular interstate route
ceased to be operative as long as an adequate service was being proI
82 (1936) 55
83 The most
C.L.R. 1.
notable was between the Peanut Case (1933) 48 C.L.R. 266, on the
one hand, and Hartley v . W a l s h (1937) 57 C.L.R. 372, and the Milk Board Case
(1939) 62 C.L.R. 116, on the other.
85 Ibid.
84 Supra. n. 78.
86 After a dictum by Isaacs J. in James v . Cowan (1930) 43 C.L.R. 386, 418, in
a dissenting judgment approved by the Privy Council and described as 'convincing':
(1932) 47 C.L.R. 386, 398. What Isaacs J. said was that the protection afforded
by section 92 was 'a personal right attaching to the individual and not attaching
to the goods'. [Italics in original.]
87 (1945) 71 C.L.R. 28 (Latham, C.J., Rich, Starke, Dixon and Williams JJ.).
8s (1949) 79 C.L.R. 497 (P.C.).
89 (1945) 71 C.L.R. 29.
90 The Act also extended to the. federal territories but section 92 oroblems did
not arise because section 92 does not mention territories.
~
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Freedom of Interstate Trade
25 1
vided by the Commission on the same route. By section 47 the issue
of a licence to anyone other than the Commission was ~rohibited
unless the licensing authority was satisfied that such a licence was
necessary to meet the needs of the public. By section 4991 it became an
offence to enter into a contract for interstate air transport with anyone
not holding an operative airline licence. The effect of this scheme
was to prohibit interstate air transportation by anyone other than the
Commission.
The granting of a monopoly to a body under a duty, or at least a
strong incentive, to provide adequate services introduced a new element into the contest between the two main competing interpretations
of section 92. The individualist theory, that anyone in a position to
do so had a right to engage in interstate trade unhindered by governmental restriction, unquestionably led to the invalidity of the monopoly
provisions. Nothing could be a clearer restriction of freedom of trade
than a prohibition of trading at all and as long as the Commission
provided the services, prohibition of everyone else was the result; but
the application of the discrimination test became obscured. One way
in which the argument could be put was that invalidity followed here
also, for the prohibition of interstate trade to anyone except the Commission introduced a discrimination between interstate trade and
intrastate trade, to which no such restriction applied. An alternative
way of using discrimination as a criterion was to say that there was no
discrimination because the free flow of air transportation among the
States was in no way affected by the Act. On this view section 46 did
not contravene section 92 because it imposed no burden. It was not
interstate trade which was restricted but the number of people enabled
to engage in it. There is a close parallel with the argument of the
Wheat Caseg2that compulsory acquisition did not infringe section 92
because it operated upon ownership, not trade.
The reason why the Airlines Caseg3 marks a significant stage towards the present dominance of the individualist theory is that the
High Court was unanimous in deciding that the mc4nopoly section
infringed section 92. Inevitably a decision in this sense continued the
McArthur-Janzes v. Cowan-Peazut line of thought in stressing the
right of the individual to trade interstate. Not all of the Court saw
it in that light. Latham C.J. in particular rested his decision on the
ground that the Act was 'directed against'94 interstate trade. This was
a perfectly tenable position but on the facts of the case it necessarily
implied that freedom of interstate trade was linked with the freedom
of individuals to engage in interstate trade, for what was in question
was a monopoly excluding everyone but the government. It took a
91 The intervening section 48
92 (1915) 20 C.L.R. 54.
94 (1945) 71 C.L.R. 29, 61.
was immaterial to section 92.
93
(1945) 71 C.L.R. 29.
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illelbourvze University Law Review
[VOLUME
6
critical step away from the position that interstate trade as such remained free if it was not subjected to adverse discrimination based on
its interstate character or to any burden not equally shared by intrastate trade.
This movement of opinion received the approval of the Privy
Council in the Bank Nationalization Case95 in 1949. This case was
concerned with the validity of the Banking Act 1947 (Cth) which in
effect nationalized banking in Australia. Section 92 questions arose
in connection with Part 7 of the Act, which consisted only of section
46. This section in its more material parts empowered the Treasurer
by notice to prohibit any private bank from continuing in business.
The Privy Council upheld the majority decision of the High Court
that this power to prohibit was an infringement of freedom of interstate trade. It has been said with some force96that the form in which
the litigation reached the Privy Council was excessively artificial because the inter se provisions of the Constitution9' had the effect that
the section 92 question alone could be argued. This divorced one
aspect of the whole legislative scheme from the rest and required that
it be treated as an isolated phenomenon without context. Moreover the
Privy Council held that in this attenuated form the section 92 issue
was so interwoven with inter se questions that they lacked jurisdiction
to decide the case. The outcome has been aptly described as an
'authoritative obitev dictum',98 but authoritative it is.
As in the Airlines Case99questions arose as to the scope of the trade
and commerce power and whether banking fell within the meaning
of trade and commerce for the purpose in hand. It was held that it
did. On section 92 the Privy Council accepted the individual right
theory in the clearest terms. In answer to the argument that the
section did not guarantee the freedom of individuals they cited James
v. Cowanloo and James v. Commonwealth1 as directly in point and
continued:
Yet James was an individual and James vindicated his freedom in hardwon fights. Clearly there is here a misconception. It is true, as has been
said more than once in the High Court,3 that section 92 does not
(1949) 79 C.L.R. 497.
Sawer in The British Commonwealth: Australia, (ed. Paton), 73.
97 By section 74 of the Constitution no matter relating to the powers of the
Commonwealth and the States, or of two or more States, inter se, can be taken on
appeal to the Privy Council without the certificate of the High Court. Such a
certificate is now never given.
A question arising under section 92 is not such a
matter.
98 Sawer in The British Commonwealth: Australia, (ed. Paton), 73.
99 (1945) 71 C.L.R. 29.
loo (1932) 47 C.L.R. 386.
1 (1936) 55 C.L.R. 1.
2 (1949) 79 C.L.R. 497, 635.
3 But most notably later by Dixon J. in James v. Comlnonwealth (1939) 62
C.L.R. 339, 361-2. Infra n. 59.
95
96
AUGUST19681
Freedom of Interstate l'rade
253
create any new juristic rights, but it does give the citizen of State or
Commonwealth, as the case may be, the right to ignore, and if necessary, to call upon the judicial power to help him to resist, legislati*
or executive action which offends against the section. And this is just
what James successfully did.
Their Lordships went on to deal with an argument which in effect
was another variation of the discrimination test. This was that section
92 invalidated legislation which reduced the total volume of interstate
trade. Three objections were advanced. First, the authority of the
James Cases, 'for there the section was infringed though it was not the
passage of dried fruit in general, but the passage of the dried fruit of
James from State to State that was i m ~ e d e d .Secondly,
'~
it was impracticable to measure the effect of interference on the total volume of
interstate trade because other factors might affect it. Thirdly in
section 92 the words 'trade' and 'commerce' were cut down by association with 'intercourse' because this word contemplated individual
freedom to cross State borders.
Without impugning the main ground of decision, the observation
may be made that this reasoning is not strong. T h e true answer to the
argument lay not so much in the difficulties of the conception of
volume of trade as in its being an attempt to characterize interstate
trade as an economic phenomenon apart from the rights of individuals
to engage in it. If this approach was to be rejected in the form of the
discrimination test itself, there was no point in reintroducing it in
another form. In any event mere volume of trade is inadequate as a
criterion of interference. Interstate trade may increase in volume even
though burdened or discriminated against. The argument from authority depends on a particular reading of the two main James Cases
and thereby begs the question. The inconsistencies in the reasoning of
James v. Commonwealths in particular render it equally cogent to
explain the result on the ground that the Commonwealth Act in fact
discriminated against interstate trade, for it imposed quota restrictions
on interstate trade alone. As to the word 'intercourse', no reason suggests itself why on a discrimination approach parallel reasoning should
not apply in the same way as to trade and commerce: no greater restriction may be laced on movement among the States than on personal movement generally.
The straightforward proposition that there was no discrimination
against interstate trade in the Banking Act because the power to prohibit private banking applied as much to intrastate as to interstate
transactions was rejected as i r r e l e ~ a n t This
. ~ was in accord with the
previous express rejection of the relevance of this form of the discrimination argument in James v. C~rnmonwealth.~
Similarly the
4
6
(1949) 79 C.L.R. 497, 635.
(1949) 79 C.L.R. 497, 636.
5
7
(1936) 55 C.L.R. 1.
(1936) 55 C.L.R. 1, 56.
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Melbourne University Law Revzew
[VOLUME
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proposition that the question whether section 92 had been infringed
was always a question of fact was reaffirmed.8 As to expressions in the
earlier cases tending to suggest that the court was entitled to look
beyond the precise terms of the Act to discover whether its 'real
object' was 'directed against' or 'aimed at' interstate trade, the Privy
Council held that they were not intended to take the inquiry beyond
the 'necessary legal effect'9 of the statute as revealed by what it said
on its face. In the present case the necessary legal effect of section 46
of the Banking Act was to authorize the total prohibition of privatelyowned interstate banking. Such a prohibition was a manifest contradiction of freedom of interstate trade in banking. The proposition
that simple prohibition cannot be justified as reasonable regulation
was expressly approved.1°
Apart from the concept of regulation, the only qualification of the
wide meaning assigned to section 92 was that the mere fact that
legislative or executive action incidentally affected interstate trade
adversely was not enough to infringe the section. With little elaboration beyond the caution that the words in themselves furnished no
more than general guides, a distinction was drawn between direct and
immediate impediments and indirect or consequential impediments."
The idea behind this distinction is best described in the context of
the theory of construction of section 92 advocated throughout by
Dixon J., particularly in the T m s p o r t Cases.12 This follows.
The Anomaly of the Transport Cases
The result of the Bank Nationalization Case13 was to leave the
Transport Cmes14 in a category of their own. It will be recalled that
the difficulty with them was that a bare
of an activity had
been repeatedly held to infringe section 92, yet simple prohibition
subject to executive relaxation was the legislative basis on which road
transport licensing rested. Distinctions could still be drawn between
the Transport Cmes15 and the rest but none could be regarded as
tenable. It could be said that road transport was not interstate trade
or commerce but merely a means whereby trade and commerce was
carried on. This argument characterized trade and commerce as consisting in the movement of goods and not the furnishing of the means
to move them. It was scarcely possible to justify the Trawsport Cases16
(1949) 79 C.L.R. 497, 635.
(1949) 79 C.L.R. 497, 636-37. Cf. the reference to 'pith and substance' at
641-2. The reference to 'necessarv legal effect' was taken from the dissenting judgment of Isaacs J. in James v . COW& (1930) 43 C.L.R. 386, 409. This was the
judgment described on appeal by the Privy Council as 'convincing': (1932) 47
C.L.R. 386, 398.
11 (1949) 79 C.L.R. 497, 639.
10 (1949) 79 C.L.R. 497, 640.
12 Supra. n. 78.
13 (1949) 79 C.L.R. 497.
14 Supra. n. 78.
1 5 Ibid.
16 Ibid.
8
9
AUGUST
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Freedom of Interstate T r a d e
255
on this ground after the Airlines Case1' and the Bank Nationalization
Case.18 In each a similar argument had been advanced and rejected.
Both air transportation and banking were said to be incidents of,
facilities for, trade and commerce and not trade or commerce itself.
It is implicit in the results of those cases, quite apart from express
rejection, that this argument was wrong.
Alternatively, it might be said that the road transport legislation
kept within the limits of permissible regulation because its object and
effect was not to impair the freedom of interstate trade as an end in
itself but to order the state of competition between road and rail
transportation in general in the economic interests of the community.
In the state of authority by 1949 this argument ran into several difficulties. Initially it failed to meet the repeated express holdings that
prohibition was not regulation. Secondly, the fact that interstate road
transportation was not singled out for particular treatment was not
relevant. Thirdly, the object and effect of the legislation were not
relevant in any sense beyond the legal effect of its precise terms,
which led straight back to prohibition. T h e only distinction to be
drawn between the Transport Caseslg and the Airlines2' and Bank
Nationalization Cases21 lay in the element of total elimination of
private competition, which did not go to the basic principles of interpretation which had been developed.
Since the T r m s p o ~ tCases22 were overruled in Hughes and Vale.
Pty Ltd v. N e w South Wales ( N o
in 1954, these considerations
would have no more than historical interest were it not that they
provided for some years the context in which Dixon J., in dissent,
developed the views as to the proper construction of section 92 which
have since come to be generally accepted. His Honour's starting point
was that so far as possible the application of the section to particular
facts must be deduced from the exact terms of the section itself. His
general view has never been better expressed than in the following
passage, which has been i n f l ~ e n t i a l . ~ ~
Any act or transaction for which protection is claimed under section 92
must be a part of trade, commerce or intercourse among the States, that
is to say, it must be something done as preparatory to, or in the course
of, or as a result of, inter-State movement of persons and things or
inter-State communication. There can be no doubt that the use of
motor vehicles for the carriage d goods from one State to another for
the purpose of sale fulfils this requirement. But it does not follow from
the possession of this character that the act of transportation is entirely
free from Government control. The question whether section 92 applies
17 (1945) 71 C.L.R. 29.
19 Supra. n. 78.
21 (1949) 79 C.L.R. 497.
23 (1954) 93 C.L.R. 1.
24 0. Gilpin Ltd v. Commissioner
204-6.
18
20
22
(1949) 79 C.L.R. 497.
(1945) 71 C.L.R. 29.
Supra. n. 78.
for Road Transport (1935) 52 C.L.R. 189,
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to a given case involves one or more of several considerations which
are susceptible of separate examination. First, the nature and operation
of the interference or of the exertion of power complained of, must be
considered in order to determine whether it amounts to a restriction of
or a burden upon the acts of transactions for which immunity is
claimed as part of inter-State trade, commerce and intercourse. Second,
the nature of the acts or transactions found to be restricted or burdened
must be examined in order to ascertain whether they are part of interState trade, commerce, or intercourse. Third, the nature and incidence of
the restriction or burden must be examined in order to determine
whether it belongs to that class freedom from which is secured by
section 92. For acts or transactions which in fact occur in the course
of inter-State trade may be restrained or burdened in consequence of
the intervention by the State in the affairs of the citizen for causes
which have no relation or relevance to trade, commerce and intercourse
among the States. The expression 'trade, commerce, and intercourse
among the States' describes a section of social activity by reference to
s ecial characteristics. The freedom it gives plainly relates to those
c aracteristics. It is only where they are present that the activity is to
be absolutely free. It appears to me to be natural to understand a freedom that is so given as referring to restrictions or burdens imposed in
virtue of those characteristics upon the presence of which the grant of
immunity is based. It is, perhaps, upon some such reasoning that the
interpretation of section 92 proceeds which confines it to discriminatory
laws, that is to forbidding discrimination against inter-State transactions
in favour of domestic trade. But that interpretation overlooks the fact
that a restriction conditioned on any one of the characteristics which
are connoted by the description 'trade commerce and intercourse among
the States' discriminates against such transactions in favour of transactions from which that characteristic is absent. There is no reason
why the freedom should be limited to restrictions based upon the interState character of the activity so described. Its character of trade or
intercourse is just as essential to the description. 'Free' must at least
mean free of a restriction or burden placed upon an act because it is
commerce, or trade, or intercourse, or because it involves movement into
or out of the State. By this I mean that the application of the restriction
or burden to the act cannot be made the consequence of that act's being
of a commercial or trading character, or of its involving intercourse
between two places, or of its involving movement of persons or things
into or out of the State.
Very many of the difficulties which have been felt as to a logical
application of the words 'absolutely free' to inter-State trade, commerce
and intercourse, disappear, I think, if it is recognized that it is a freedom from restrictions or burdens which have reference to one or other
of the distinguishing features which form the basis of the immunity.
Thus a deserting husband might be arrested under a law of a State
notwithstanding that his destination lay over the border. But if the
State law made his liability to arrest depend not on the fact of
desertion but upon his attempting to leave the State, I should think
that section 92 would invalidate it. In the first case, his interstate,
journey might be interrupted but only as a consequence produced by
a law which had no reference to any aspect of trade, commerce and
intercourse among the States. In the other case, the State boundary
K
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Freedom of Interstate Trade
257
is adopted by the law as the limit of the deserting husband's movement; the inter-State character of his flight is made the reason for his
detention.
A law of a State forbidding the mixing of straw chaff with hay chaff
would be perfectly good even if such a mixture were desired or
required for an inter-State commercial dealing; but, if the law simply
penalized the sale of such a mixture, it could not extend to sales made
for delivery across the inter-State boundary. The first law applies independently of any quality which goes to constitute inter-State trade,
the second depends for its application upon an essential ingredient of
commerce, sale.
Under a State Income Tax Act taxation clearly might be levied on
income derived exclusively from a business of inter-State carrying,
because the criterion of the liability does not relate to any of the
ingredients of inter-State commerce. But a tax on consignment notes
might well be considered incapable of application to contracts of interState carriage, on the ground that it made commercial transportation
between two places the ground of liability.
Further, it is not every regulation of commerce or of movement that
involves a restriction or burden constituting an impairment of freedom.
Traffic regulations affecting the lighting and speed of vehicles, tolls
for the use of a bridge, prohibition of fraudulent descriptions upon
goods, and provisions for the safe carriage of dangerous things, supply
examples.
But, given an act or transaction which falls within the conception of
trade, commerce, or intercourse among the States and a restriction or
burden operating upon that act or transaction, it appears to me that it
must be an infringement upon the absolute freedom guaranteed by
section 92 unless the restriction or burden is imposed in virtue of or in
reference to none of the essential qualities which are connoted by the
description 'trade, commerce, and intercourse among the States'.
It will be seen from the examples given that on this view the
question whether section 92 has been infringed depends not on the
substance of what the legislature wishes to achieve but on the form
of the legislation. This, it is submitted, is the idea behind the vague
distinction between direct and indirect or consequential burdens on
interstate trade. A direct burden is one the criterion for operation
of which is some act of trade or commerce. An indirect burden is
one which does not as a matter of law operate by reference to a
criterion which is itself an act of trade or commerce, although in
practice it may entail a marked interference with trade or commerce.
I t would be superfluous to invent further examples, but it may be
noted that this approach has been criticised.
One criticism has been that the appearance of logical inference is
illusory and 'can only result in politico-economic conceptions being
brought into the meaning of the section either unconsciously or without adequate attention to their origin and nature'.25 Another has been
that the result of its application is not 'one which the framers of
25
Sawer, Australian Constitutional Cases, (3rd ed.), 274.
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section 92 either intended or foresaw'.26 As to the second of these
criticisms the observation may perhaps be permitted that although it is
no doubt well-founded its relevance is by no means confined to section I
92. There are many sections of the Constitution of which the same
might be said, conspicuously section 9627 and the provisions for an I
interstate commerce commissi0n.~8 As to the first, the best answer I
may be that although the Dixonian approach may have the incidental I
effect of tying the Constitution to a particular mode of economic
thought, its main purpose and virtue is to achieve consistency in the
law without over-simplification. If the criticism is that the High Court I
should relax its traditional reluctance to decide constitutional issues 1
by reference to other than strictly legal criteria, then again it goes
further than section 92. It must, however, be conceded that in the
present situation section 92 is little, if anything, more than an impediment to the effective ordering of the economy on a nationwide basis.
This result approaches the antithesis of what the section was originally
intended to do.
1
Transport Cases Ove~~ruled:
Uniform Rub Established
In this account of the development of the main line of interpretation of section 92 it remains only to record the bringing into line
in Hughes and Vale Pty Ltd v. New South W a l e s ( N o
in 1954
of the law relating to road transport legislation. The legislation under
attack was the State Transport (Co-ordination) Act 1931-1 9 5 1
(N.S.W.) which had been upheld in its application to interstate
trade twenty-one years before in Vizzard's Case.30 Its basic relevant
characteristic was that it prohibited commercial road transport except
under licence. There was an executive discretion to issue licences.
Fees were payable for them and conditions could be imposed. In the
High Court the legislation was again sustained, by a majority of four
to three.31 The Privy Council reversed this decision in an opinion
26 Hughes and Vale Pty Ltd v. N.S.W. ( N o 2 ) (1955) 93 C.L.R. 127, 183, per
McTiernGn J.
27 'During a period of ten years after the establishment of the Commonwealth
and thereafter until the Parliament otherwise provides, the Parliament may grant
financial assistance to any State on such terms and conditions as the Parliament
thinks fit.' On the scope given to the section by judicial interpretation see Victoria
v . Commonwealth (Second Uniform T a x Case) (1957) 99 C.L.R. 575, 603-11.
2s Sections 101-104. On the fate of this proposal vide Sawer, Australian Federal
Politics and Law 1901-1929, 92, 152-3, 204.
29 (1954)
,- - - , 93
- - C.1
- .-..R.
- -. 1.
-.
30 (1933) 50 C.L.R. 30.
31 (1935) 87 C.L.R. 49. The dissenters were Fullagar, Kitto and Taylor JJ. It is
~articularlvinteresting that Dixon C.T.. whose view of section 92 was close to that
of the dissenters, sh:uld on this occasion have chosen to form a majority with
McTiernan, Williams and Webb, JJ. to uphold the legislation, notwithstanding his
earlier reversion to dissent from the established view in McCarter v . Brodie (1950)
80 C.L.R. 432, where he voted with Fullagar J. It was no doubt his vote, in effect
a casting vote, in Hughes and Vale ( N o I) which rendered the appeal to the Privy
Council inevitable and thereby led to the rationalization of the law.
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Freedom of Interstate Trade
259
notable for the unusually large number of quotations from High Court
judgments. This course was taken for two reasons.32 First the Privy
Council did not think it could improve on the High Court's own language. Secondly, the question under consideration had been the s u b
ject of acute disagreement in the High Court and their Lordships
wished to leave no doubt with whom they agreed. The opinion traversed the history of the Trarzsport Cases33 and parallel developments
in the interpretation of section 92 to reach the logical conclusion. In
doing so it reaffirmed the several propositions of law with which the
Transport
were inconsistent, particularly approving passages
from the dissenting judgments of Dixon and FulIagar JJ. in 1950 in
McCarter v. B r ~ d i e the
, ~ ~last of the Transport C m ~ e before
s ~ ~ Haghes
and Vale ( N o
itself, and from the judgment of Dixon C.J. in the
Court below.
~ ~ J. dealt with six propositions which
In McCarter v. B r ~ d i eDixon
he regarded as essential to the reasoning of the T r m s p o r t Cases.39
Three of them he expressed negatively, regarding them as wrong since
. ~ ~ were: 'that sec. 92 of the
the Bank Nationalization C a ~ e They
Constitution does not guarantee the freedom of individuals'; 'that if
the same volume of trade flowed from State to State before as after the
interference with the individual trader . . . then the freedom of trade
among the States remained unimpaired'; and that a burden on interstate trade escapes section 92 if it is equally a burden on intrastate
trade. Two others he regarded as positively established by the Bank
Nationalization Case.41 They were 'that the object or purpose of an
Act challenged as contrary to section 92 is to be ascertained from what
is enacted and consists in the necessary legal effect of the law itself
and not in its ulterior effect socially or economically'; and 'that the
question what is the pith and substance of the impugned law, though
possibly of help in considering whether it is nothing but a regulation
of a class of transactions forming part of trade and commerce, is beside
the point when the law amounts to a prohibition or the question of
regulation cannot fairly arise'. The sixth proposition his Honour regarded as established by the Airlines Case.42 It was that whereas the
tendency of the Transport Cases43 had been 'to thrust the carriage of
goods and persons towards the circumference of the conception of
had 'shown that it must lie at or near
commerce', the Airlines
the centre'.
The unqualified approval given to these observations by the Privy
32 (1954) 93 C.L.R. 1, 33-4.
34 Ibid.
36 Supra. n. 78.
38 (1950) 80 C.L.R. 432, 465-6.
40 (1949) 79 C.L.R. 497.
42 (1945) 71 C.L.R. 29.
44 (1945) 71 C.L.R. 29.
33 Supra. n. 78.
35 (1950) 80 C.L.R.
37 (1954) 93 C.L.R.
39 Supra. n. 78.
41 Ibid.
43 Supra. n. 78.
432.
1.
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Council in Hughes and Vale (No
left as the only remaining
ground on which the transport legislation might be sustained the argument that it was merely regulatory in character. If it was, the Bank
Nationalization Case46 established its validity. In answer to this their
Lordships turned to the judgments of Fullagar J. in McCmter v.
B r ~ d i and
e ~ ~of Dixon C.J. in the case before them.48 T h e discussion
in those judgments of the meaning of regulation in the general context
of section 92 goes beyond the scope of this article. Here it is sufficient
to say that no difliculty presented itself on the legislation before the
Privy Council in this case. Fullagar J. had said in the earlier case:49
'As to what is not regulatory in the relevant sense, one thing at least is
clear. Prohibition is not r e g ~ l a t i o n . And
' ~ ~ a little later:51 'It is quite
impossible, in my opinion, to distinguish the present case from the
case of a simple prohibition. If I cannot lawfully ~rohibitaltogether,
I cannot lawfully prohibit subject to an absolute discretion on my part
to exempt from the ~rohibition.The reservation of the discretion to
exempt by the grant of a licence does not alter the true character of
what I am doing.'
In Hughes and Vale (No I ) itself Dixon C.J. had said:52
[T]o my mind the distinction appears both clear and wide between,
on the one hand, such levies and such provisions prohibiting transportation without licence as [the ones before the Court] and on the other
hand the regulation and registration of motor traffic using the roads
and the imposition of registration fees. In the same way the distinction
is wide between such provisions and the use of a system of licensing
to ensure that motor vehicles used for the conveyance of passengers or
goods for reward conform with specified conditions affecting the safety
and efficiency of the service offered and do not injure the highways by
excessive weight or immoderate use or interfere with the use of the
highways by other traffic. The validity of such laws must depend upon
the question whether they impose a real burden or restriction upon
inter-state traffic.
The similarly unqualified approval given by the Privy Council to
these passages53completed the process of reaffirming the general principles of interpretation laid down in the Bank Nationalization
and the Airlines Case55and making it clear that they applied to road
transport legislation as much as to any other.
46 (1949) 79 C.L.R. 497.
45 (1954) 93 C.L.R. 1, 23.
48 (1953) 87 C.L.R. 49, 62.
47 (1950) 80 C.L.R. 432, 483.
49 (1950 80 C.L.R. 432,498.
50 The ocus classicus of a bare prohibition is Tasmania v . Victoria
f
(1935) 52
C.L.R. 157. Victoria prohibited completely the importation of Tasmanian potatoes
on the basis of an executive opinion that they were 'likely' to introduce disease.
Held, invalid. A complete prohibition was not a reasonable regulation of the potato
trade to keep out disease. Ex p. Nelson (No 1) (1928) 42 C.L.R. 209, which went
the other way with an equally divided court, can no longer stand in view of later
developments.
5 1 Ibid.
52 (1953) 87 C.L.R. 49, 68-69.
5 3 (1954) 93 C.L.R. 1, 32.
54 (1949) 79 C.L.R. 497.
55 (1945) 71 C.L.R. 29.
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Freedom of Interstate Trade
26 1
Executive Action
It is settled that section 92 applies as much to executive as to legislative interference with freedom of interstate trade.56 The effect of
this is that a statute which does not contravene section 92 cannot
authorize executive action which does. The action taken is therefore
without lawful justification under statute. Whether it gives rise to a
liability in damages depends on the ordinary rules of private law.57
A related rule is that a statute which authorizes action contravening
section 92 is not saved from invalidity by proof that it is in fact administered in a manner which does not contravene section 92.58
Private Right of Action
In the third of the cases which the fruit grower James brought
against the Commonwealth, James v. C~mmorzwealth~~
in 1939, tried
before Dixon J., he claimed damages for conversion of five consignments of dried fruits and for general loss of business. The basis of his
action was that the legislation relied on as justifying the interferences
with his business had proved to be invalid. H e recovered damages for
four consignments of dried fruits only. T h e interest of the case so far
as constitutional law is concerned is that part of the plaintiff's argument was that he was entitled to recover damages for breach of section
92. He had previously advanced this argument unsuccessfully before
the full High Court in James v. South
in 1927. The reason
for attempting to rely on it again now was that in James v. Cman6*
the Privy Council had made an observation which might be understood as having removed the basis for the earlier decision of the High
Court on this point.62
Dixon J. held that nothing in James v. C o w m ~affected
~ ~ this part
of the decision in James v. South A ~ s t r a t i aand
~ ~ that section 92
confers no private right of action. H e said:65
C.L.R. 386, 396; Commonweakh v. Bank of
(1949) 79 C.L.R. 497, 635; Wilcox, Mofflin Ltd v. N.S.W. (1952) 85
C.L.R. 488, 522; Kerr v. Pelly (1957) 97 C.L.R. 310.
56James v. Cowan (1932) 47
N.S.W.
57 See next section of text.
58 Collier Garland Ltd v. Hotchkiss (1957) 97
C.L.R. 475.
C.L.R. 339.
60 (1927) 40 C.L.R. 1.
61 (1932j 47 C.L.R. 386.
62 The Privy Council, at 47 C.L.R. 396, had remarked that the 'Constitution is
not to be mocked by substituting executive for legislative interference with freedom'.
The meaning of this observation was that section 92 applies to executive as much
as to legislative action. The argument being put to Dixon J. was that it meant that
the earlier holding in the High Court in James v. South Australia (1927) 40 C.L.R.
1, that section 92 did not confer private rights of action because it was an inhibition
addressed to parliaments, had been disapproved by the Privy Council. The Privy
Council of course intended not to overrule the High
- Court's decision on this point
but to expand it.
63 (1932) 47 C.L.R. 386.
64 (1927) 40 C.L.R. 1.
65 (1939) 62 C.L.R. 339, 362.
59 (1939) 62
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There is, in my opinion, no sufficient reason to regard section 92 as
including among its purposes the creation of private rights sounding in
damages. It gives to all an immunity from the exercise of governmental
power. But to find whether a government act be wrongful the general
law must be applied. Section 92 will do no more than nullify an
alleged justification. The plaintiff cannot, therefore, recover damages
under section 92 independently of any tort by the Commonwealth.
The law may be regarded as settled in the sense that 'section 92 I
does create any new juristic rights'66 by way of private entitlement to I
damages, but this rule cuts both ways. If section 92 does not create I
any new liability to damages, neither does it allow the extinction of I
existing liability. This was decided in Cmmissioner for Motor Trans- 1
port v. Antill Ranger G Co. Pty Ltd,67 in 1956. In consequence of I
Hughes m d Vab ( N o
State governments became liable to repay 1
licence fees exacted under legislation now decided to be invalid. New I
South Wales enacted further legislation to extinguish this liability. I
It was held both in the High Court and in the Privy Council that this I
legislation also infringed section 92.
The difficulty, such as it was, lay in the argument that the Act did I
not of itself operate on or burden interstate trade or commerce. The I
answer69 was that to put the argument this way obscured the issue.
The protection given by section 92 would be illusory if the executive I
could act in contravention of the section and then have its action I
ratified by the legislature. It was necessarily70
implicit in the declaration of freedom of inter-State trade that the I
protection shall endure, that is to say, that if a governmental interference could not possess the justification of the anterior authority of I
the law because it invaded the freedom guaranteed, then it could not, ,
as such, be given a complete ex post factol justification. By the words I
'as such' is meant that it cannot be given a justification ex post facto in I
virtue or by reason of its very nature as an interference with the freedom d inter-State trade.71
Perhaps because of indications in the judgments in that case that I
one fault with the legislation was that it was not merely 'an attempt1
to clear u p a difficult administrative situation' with justice,72 but1
applied with out distinction to all classes of liability which might arise,
New South Wales passed further legislation designed to achieve sub1
66 Bank Nationalization
67 (1955) 93 C.L.R. 83
Case (1949) 79 C.L.R. 437, 635.
(H.C.); (1956) 94 C.L.R. 177 (P.C.). In the High Court
Dixon C.J., McTiernan, Williams, Webb, Fullagar, Kitto and Taylor JJ.
68 (1954) 93 C.L.R. 1.
69 See on this particularly the majority judgment in the High Court at 93 C.L.R.
101.
- - -.
70(1955) 93 C.L.R. 83, 101. The judgment does not say 'necessarily' but 'it1
seems', but the quotation in the text states a proposition which appears to be1
necessarily implied by the decision itself.
71 (1955) 93
72 (1955) 93
C.L.R. 83, 101-102.
C.L.R. 83, 101.
AUGUST
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Freedom of Interstate Trade
263
stantially the same effect by means of a limitation period. This was
held similarly invalid in Barton v. Commissioner for Motor
in 1957. The limitation
imposed was twelve m~nths.~"n the
view of the majority there was no distinction in relation to the claims
extinguished between total extinction and ~ a r t i a extinction
l
by means
of a limitation period. The dissenters75took the ground that there was
a difference in kind between extinction and limitation, at all events if
the limitation period was reasonable.
Hypothetical Cases
It should be mentioned finally that the Court will not decide a
hypothetical section 92 question, that is to say, a question relating to
the validity of a statute under section 92 which does not arise on the
e~idence.7~
This rule is merely a particular application of the general
rule in common law countries that the courts will not decide hypothetical cases. Another manifestation of the same principle in Australian constitutional law is that it is no part of the federal judicial
power to give advisory opinions on the validity d a statute or a proposed statute before an actual case arises under it.77
The requirement in a section 92 case that the facts include an interstate element is not to be confused with the question whether the
parties engage in interstate trade. Dixon C.J. has observed78 that the
practice of interstate trade does not of itself give a person standing
to sue. The question is whether the legislative power under consideration extends to certain transactions. If the parties cannot prove any
relevant transactions it is nothing to the point that in other respects
they engage in interstate trade.
Conclusion
It seems clearest to attempt a summary of the result in the form of
separate propositions.
1. Section 92 binds both the Commonwealth and the States.
2. The freedom section 92 guarantees is from governmental
restriction of any kind, whether legislative or executive in character.
It is not limited to freedom from fiscal impositions alone.
73 (1957) 97 C.L.R. 633 (Dixon C.J., McTiernan, Webb, Fullagar, Kitto and
Taylor JJ.).
74 Which in practice was reduced to eleven months because one month's notice
of action had to be given.
75 Fullagar and Taylor, J The headnote at 97 C.L.R. 634 is wrong in saying
that the dissenters expresse no opinion on this point. Fullagar J. clearly expressed
his dissent from the majority at 97 C.L.R. 659-60 and Taylor J. at 97 C.L.R. 666
concurred in the judgment of Fullagar J.
76 Crothers v . Sheil (1933) 49 C.L.R. 399; T h e King v . Connare, ex p. W a w n
(1939) 61 C.L.R. 596; The King v . Martin, ex p. Wawr, (1939) 62 C.L.R. 457;
Graham v . Paterson (1950) 81 C.L.R. 1.
77 In re Judiciary and Navigation Acts (Advisory Opinions Case) (1921) 29
d.
C.L.R. 257.
78 Redfern v . Dunlop Rubber Australia Ltd
(1964) 110 C.L.R. 194, 207.
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I
3. The freedom section 92 guarantees is freedom of the individual I
to engage in interstate trade or commerce.
4. The freedom section 92 guarantees is not limited to literally 1
crossing, or bringing goods across, a State border.
5. Whether an admitted burden is an infringement of the freedom I
of an activity admitted to be interstate trade or commerce depends on I
whether the criterion for bringing the burden into operation is itself I
an act of trade or commerce. If the operative criterion is of that I
character, there is an infringement of section 92. If it is not, there is I
no infringement, whatever the incidental economic effects on interstate trade or commerce.
6. Whether the freedom guaranteed by section 92 has been im- I
paired is a question of fact.
7. The freedom section 92 guarantees is not inconsistent with I
reasonable regulation of interstate trade and commerce.
8. Prohibition of an activity, whether total or subject to executive I
discretion, is not regulation and is inconsistent with freedom to engage I
in that activity.
9. The object, purpose, substance or effect of legislation is im- I
material to the extent that it is distinguishable from the legal effect I
of the actual terms of the legislation.
10. It is immaterial that legislation applies impartially to both I
intrastate and interstate trade or commerce.
11. The volume of interstate trade after the interference com- I
plained of, as compared with the volume before, is immaterial.
12. In applying section 92 no distinction is to be drawn between I
different kinds of interstate trade or commerce.
13. Section 92 confers no private right of action but protects rights I
of action arising from invalidity brought about by section 92 itself.
14. The court will not determine the validity of legislation in relation to section 92 unless a relevant interstate element arises on the
evidence.